WorldCom can make a comeback

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Jerry Edgerton, MCI's government coach

Jerry Edgerton, senior vice president of government markets for WorldCom Inc., began his telecommunications career with one of that company's forerunners, MCI Communications Corp.

In the last year, corporate scandals and bankruptcy have cost WorldCom an estimated $175 billion in shareholder equity as well as much of its reputation.

In April the company filed a reorganization plan that it hopes will bring it out of Chapter 11 bankruptcy later this year. It also brought back the old MCI name.

The company has long been one of the government's leading telecom services providers. Although Edgerton's group has continued to win federal contracts, several groups are campaigning to have the company barred from government work.

Before coming to MCI, Edgerton directed the federal operations group at Tymnet/McDonnell Douglas Network Systems Co. He has also managed application design and data center operations for the Postal Service.

Edgerton received a bachelor's degree in electrical engineering from North Carolina State University and a master's in business administration from Pace University in New York.

GCN senior editor William Jackson spoke with Edgerton by telephone.

GCN: How tainted is the WorldCom Inc. name?

EDGERTON: Every time I see it on TV it has 'fraud' associated with it.

We could have renamed, but rather than spend our resources on researching, developing and associating with a new name, we elected to go with something that still has significant value in the marketplace and meant a lot to the employees.

GCN: What's the significance of your rebranding as MCI?

EDGERTON: We are attempting to distance ourselves from those few individuals who perpetrated the fraud. Most of us involved in the company now came from the proud legacy of MCI Communications Corp., and the name change was part of re-establishing the culture and values we brought from MCI.

GCN: What does WorldCom's three-year business plan for reorganization mean for the government markets division?

EDGERTON: We have been something of a shining star within MCI over the last 15 years, so we expect to continue being a leading provider of telecommunications to the government. We see the plan as a continuation of the business we established.

The creditors have bought into it. We have a consensus that it is reasonable and something that we could put before the bankruptcy court.

GCN: What's the status of the reorganization, and have the objections filed by four states had any impact?

EDGERTON: The primary bondholders have agreed on a plan for emergence. Like any such situation, it's difficult to get everyone to agree. There are some dissidents, and we've seen some significant attacks by our competitors.

We were devastated by what has taken place over the last six to nine months. It basically destroyed all the things we built, but we're ready to come back.

GCN: Does the Securities and Exchange Commission's $500 million fine to settle civil fraud allegations have any impact on the reorganization?

EDGERTON: What it does is clear the air. This is the final piece of an agreement we reached with SEC.

We have mitigated the issues that perpetrated the fraud. We have satisfied them on accounting processes, purged people who were involved in the fraud, and made sure that all the processes are at the highest ethical level. So this is an end to a process that lets us move forward.

GCN: When do you expect to emerge from Chapter 11 bankruptcy?

EDGERTON: We're at the mercy of the courts. There is a statutory 90-day period for comment and some other court things that are calendar-driven. If we can get through these in the allotted time, we can emerge as a new corporation as early as September. That would mean the creditors would exchange their credit or bond positions for equity in the new company.

GCN: Several organizations have campaigned to bar WorldCom/MCI from doing government business. Is that a serious concern?

EDGERTON: Last fall there was a campaign that probably, if the roots were known, was financed by competitors, and we're hearing the noise again. We have operated in the highest ethical manner in our dealings with the government. We offered value to the government, and the government has determined that our services were adequate. So I'm not concerned by this.

GCN: How do you deal with the ill will generated by the earnings restatements, the bankruptcy and the fraud allegations?

EDGERTON: We deal with our customers on a personal level. When the going got tough, our customers backed us. In turn we focused on customer service because we knew any little incident would be a big incident. That created stability in our work force.

Our service actually got better. Our business base continued to grow. We continue to get new business awarded because of the relationship that has existed. It's been a difficult time'don't get me wrong. We had to reach way down and figure out how we could gut this out. It was hard to go out on the street and say, 'Yeah, I work for WorldCom.'

Last July when this began, everybody was concerned that the lights were going to go out. A lot of people were nervous. They wanted to get diverse carriers and systems integrators involved. But that's passed, because the service is good and the ability to get service has overshadowed the concerns.

GCN: How does a single company offer the diversity required for a government system?

EDGERTON: Our network was built to be self-healing. Where the diversity requirement ultimately comes in is at the local level. If you want diversity, you have to put in two plugs. In many cases we've gone to media diversity. In some situations we're using very-small-aperture terminals as a satellite access method. We use competitive local exchange carriers, we use whatever is necessary to get full access diversity to our network.

GCN: How important is the government sector to your profitability?

EDGERTON: The government's endorsement of MCI last year was absolutely critical, because if the government was willing to do business with us, then everybody was willing. Our revenue base has been stable and growing, and it is profitable.

GCN: How is the Iraq cellular network you are putting in for the Defense Department going?

EDGERTON: Extremely well, contrary to The Washington Post's report that we were behind schedule. We're not sure what schedule they were talking about. We have been queued up and ready to go for a long time, and there are only so many flights into the Middle East. We took the first available lift over there, and the process is under way.

GCN: Who are your major federal customers?

EDGERTON: FTS 2001 is our largest contract, and DOD is our largest customer. We do business in essentially every agency. I think the only agency we don't have any business in is the Environmental Protection Agency.

The Federal Aviation Administration is a significant contract for us, and the Postal Service. DOD business is in different pieces. The Social Security Administration is probably our most elegant client. They are head-and-shoulders above commercial businesses in applying customer technologies that give rapid answers to inquiries.

GCN: Where do you see further opportunities for government business?

EDGERTON: We believe the greatest opportunities are with current customers that are upgrading and migrating their network infrastructures to IP.

This is an interesting time, because we have saturated a lot of the government market. We are awaiting the evolution of Homeland Security because we provide a lot of networks for the member agencies. Where they are going in networking is still in evolution.

GCN: What are you doing in the Homeland Security Department?

EDGERTON: We currently run networks for the Coast Guard. We provide services for the Transportation Security Administration and Immigration and Customs Enforcement, so we are embedded in the organization. Ultimately, Homeland Security has to figure out how to protect its information and what its communication needs are.